Why Your Prime Money Market Funds Have Become Riskier

Why Your Prime Money Market Funds Have Become Riskier by John Grandits, Hard Assets Alliance

Money market funds are regarded as the safest, most conservative investment. It’s where cash in most checking, savings, and brokerage accounts resides. The invested amounts are readily converted into cash when we need to settle transactions and make payments.

During Lehman’s collapse in 2008, however, investors holding positions in these funds faced a serious risk of loss. The decline in value of Lehman Brother’s debt securities pushed the Reserve Primary money market fund’s Net Asset Value (NAV) below $1 per share.

That was a watershed event in the financial industry. In response, the SEC passed a series of amendments in an effort to make money market funds more...